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What is an Independent Contractor Agreement?
When can you use an Independent Contractor Agreement?
- You will be completing services for a person or company on a project-to-project basis (i.e. as an independent contractor or freelancer).
- You will be receiving services from an independent contractor.
- Note: If you are hiring an employee (not an independent contractor) use an employment agreement instead.
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Sample Independent Contractor Agreement
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This (this "Agreement") is made effective as of , by and between (the "Recipient"), of and (the "Contractor"), of In this Agreement, the party who is contracting to receive the services shall be referred to as "Recipient", and the party who will be providing the services shall be referred to as "Contractor."
. DESCRIPTION OF SERVICES. Beginning on , the Contractor will provide the following services (collectively, the "Services"):
. PAYMENT FOR SERVICES. The Recipient will pay compensation to the Contractor for the Services upon completion of the Services. no later than . .
No other fees and/or expenses will be paid to the Contractor, unless such fees and/or expenses have been approved in advance by the appropriate executive on behalf of the Recipient in writing. The Contractor shall be solely responsible for any and all taxes, Social Security contributions or payments, disability insurance, unemployment taxes, and other payroll type taxes applicable to such compensation.
. TERM/TERMINATION. shall terminate automatically on .may be terminated by either party upon days' written notice to the other party.
A regular, ongoing relationship of indefinite term is not contemplated. The Recipient has no right to assign services to the Contractor other than as specifically contemplated by this Agreement. However, the parties may mutually agree that the Contractor shall perform other services for the Recipient, pursuant to the terms of this Agreement.
. RELATIONSHIP OF PARTIES. It is understood by the parties that the Contractor is an independent contractor with respect to the Recipient, and not an employee of the Recipient. The Recipient will not provide fringe benefits, including health insurance benefits, paid vacation, or any other employee benefit, for the benefit of the Contractor.
It is contemplated that the relationship between the Contractor and the Recipient shall be a non-exclusive one. The Contractor also performs services for other organizations and/or individuals. The Recipient has no right to further inquire into the Contractor's other activities.
. RECIPIENT'S CONTROL. The Recipient has no right or power to control or otherwise interfere with the Contractor's mode of effecting performance under this Agreement. The Recipient's only concern is the result of the Contractor's work, and not the means of accomplishing it. Except in extraordinary circumstances and when necessary, the Contractor shall perform the Services without direct supervision by the Recipient.
. PROFESSIONAL CAPACITY. The Contractor is a professional who uses own professional and business methods to perform services. The Contractor has not and will not receive training from the Recipient regarding how to perform the Services.
. PERSONAL SERVICES NOT REQUIRED. The Contractor is not required to render the Services personally and may employ others to perform the Services on behalf of the Recipient without the Recipient's knowledge or consent. If the Contractor has assistants, it is the Contractor's responsibility to hire them and to provide materials for them.
. NO LOCATION ON PREMISES. The Contractor has no desk or other equipment either located at or furnished by the Recipient. Except to the extent that the Contractor works in a territory as defined by the Recipient, services are not integrated into the mainstream of the Recipient's business.
. NO SET WORK HOURS. The Contractor has no set hours of work. There is no requirement that the Contractor work full time or otherwise account for work hours.
. EXPENSES PAID BY CONTRACTOR. The Contractor's business and travel expenses are to be paid by the Contractor and not by the Recipient.
. NO RIGHT TO ACT AS AGENT. An "employer-employee" or "principal-agent" relationship is not created merely because (1) the Recipient has or retains the right to supervise or inspect the work as it progresses in order to ensure compliance with the terms of the contract or (2) the Recipient has or retains the right to stop work done improperly. The Contractor has no right to act as an agent for the Recipient and has an obligation to notify any involved parties that it is not an agent of the Recipient.
. ENTIRE AGREEMENT. This Agreement constitutes the entire contract between the parties. All terms and conditions contained in any other writings previously executed by the parties regarding the matters contemplated herein shall be deemed to be merged herein and superseded hereby. No modification of this Agreement shall be deemed effective unless in writing and signed by the parties hereto.
. WAIVER OF BREACH. The waiver by the Recipient of a breach of any provision of this Agreement by Contractor shall not operate or be construed as a waiver of any subsequent breach by Contractor.
. SEVERABILITY. If any provision of this Agreement shall be held to be invalid or unenforceable for any reason, the remaining provisions shall continue to be valid and enforceable. If a court finds that any provision of this Agreement is invalid or unenforceable, but that by limiting such provision it would become valid and enforceable, then such provision shall be deemed to be written, construed, and enforced as so limited.
. APPLICABLE LAW. This Agreement shall be governed by the laws of the .
. SIGNATORIES. This Agreement shall be signed by , and by , . This Agreement is effective as of the date first above written.
RECIPIENT:
| By: | Date: |
CONTRACTOR:
| By: | Date: |
About Independent Contractor Agreements
Learn how to hire or be hired with confidence
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How To Write an Independent Contractor Agreement
The Independent Contractor Agreement (also known as a Contractor Agreement or Contractor Contract) is a contract between a provider of services (the Contractor) and the recipient of services (the Recipient). This contract defines not only the services to be provided and the compensation to be given, but also defines the relationship between the parties. It is designed to clearly establish the Contractor as an independent contractor and not as the Recipient’s employee. Of course, if an employment relationship is desired by both parties, then an Employment Contract might be used. If you are not sure about the employment relationship, you should consult with a Rocket Lawyer network attorney for affordable legal advice.
Here are the main provisions found in an Independent Contractor Agreement, along with descriptions of what the provisions contain and what they mean.
Recipient of Services
Includes the full name of the company, as well as the name and title of the representative who will sign the agreement on the company's behalf. For example: ABC Widget Corporation, Tanya Jones, President.
Contractor
Includes the full name and address of the service provider.
Description of Services
A description of the services to be provided is an essential part of an Independent Contractor Agreement. You may list services on a separate attachment to the agreement if the list is long, and then refer to the attachment in the agreement. For example, "As described in the attached Exhibit."
Payment for Services
This clause describes how payment will be made. A single lump sum payment may be made at the completion of service or at some other defined date or event. Multiple installment payments may be made on specific dates or after specific events have occurred, such as completion of various stages of a project. If the agreement is for services that will be provided on an ongoing basis, fixed wages can be defined to pay for the services at an hourly rate or other period of payment. These are common payment options, but custom payment terms can be written into the contract.
It is not unusual for a Contractor to provide services based on an hourly rate or other fixed wage. However, if payment (based on the fixed wage) is made weekly or biweekly, the IRS may view such an arrangement as indicating an employer/employee relationship. It is recommended that you read about the IRS guidelines in the Employee vs. Independent Contractor section below. Generally, Paying a lump sum fee upon completion of the services is generally recommended to avoid a determination by the IRS that the Contractor is an employee.
Term / Termination
The Independent Contractor Agreement often specifies when the agreement will end. If the parties know in advance when the services of the Contractor will no longer be needed, that specific date can be entered.
The parties sometimes want an ongoing relationship. If that is the case, the parties may choose to have the agreement continue in effect until one of the parties elects to terminate or end it. This gives the parties the flexibility to agree to a long term commitment while retaining some freedom to end the contract when necessary.
Finally, if the services will be needed for only one job or project of unknown length, it may be best to state that the contractor agreement will terminate upon the completion of the particular project for which the Contractor is being retained.
Relationship of Parties
Defining the relationship of the parties is an important part of an Independent Contractor Agreement. The activities that are the responsibility of the Contractor versus the Recipient helps to establish that the Contractor is not the Recipient’s employee.
Recipient’s Control
This clause establishes that the Recipient is not in control of how the Contractor does their work.Professional Capacity
This clause establishes that the Contractor is a professional and does not require training from the Recipient in order to do their work.Personal Services Not Required
This provision states clearly that the Contractor is not required to perform services personally, but may, instead, hire others to perform the services required under the contract.No Location on Premises
This provision states that the Contractor does not have equipment or a desk located at or furnished by the Recipient.No Set Work Hours
This clause confirms that the Contractor has no set hours and is not required to work a set number of hours.Expenses Paid by Contractor
This clause establishes that business and travel expenses will be paid by the Contractor, not the Recipient.Ownership of Social Media Contacts
If the Independent Contractor will create, operate, or maintain social media accounts for the Recipient, this clause can spell out who will own the contacts associated with the accounts.
Independent Contractor Confidentiality
The Independent Contractor Agreement sometimes includes a clause that obligates the Contractor to protect and not disclose the Recipient's proprietary or confidential information. "Confidential information" is information that is unique, and for which there would be harm if it was disclosed. This provision sometimes also includes a sentence that requires the Contractor to return the Recipient's records.
Liability Insurance and Indemnity
The Recipient may wish to include several provisions that extend protections to the Recipient for the actions of the Contractor. The Recipient may wish to require that the Contractor obtain insurance to cover all of its employees as to this particular agreement. Having proof of insurance for the activity that the agreement will govern provides additional protection to the Recipient.
Similarly, a Recipient can also require that the Contractor indemnify the Recipient for any injuries that the Recipient may encounter or cause through the acts of the Contractor. This essentially means that the Contractor is responsible if something or someone is harmed because of the activities of the Contractor.
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Definitions of Independent Contractor Terms
Term
Definition
Confidential Information
Private information regarding the business operations of an employer or independent contractor, such as client lists, processes, formulas, or payroll data. Either party may entrust confidential information to the other, although it is more common for employers to entrust such information to independent contractors. The contract between the parties might include a non-disclosure agreement (NDA) or confidentiality clause that prevents either party from revealing the other’s confidential information.
Employer-Employee Relationship
A relationship by which an employee performs work for the employer, and the employer provides, at a minimum, financial compensation. Each party to this relationship has obligations to the other:
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The employee must perform their job duties according to their agreement with the employer.
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The employer must pay the employee and provide other benefits or perks according to their agreement. They must also abide by all applicable local, state, and federal employment laws.
Indemnification
A form of risk allocation between the parties to a contract, in which one party agrees to cover losses suffered by the other party, or to defend them against legal claims brought in connection with the contract. An indemnification clause in an independent contractor agreement, for example, might state that the independent contractor will be liable for legal claims by third parties arising from their services for the employer, and that the independent contractor will cover the cost of any such claim brought against the employer.
Independent Contractor
An individual or business that has an employment relationship with an employer, but is not an employee. Independent contractors often have their own established business or trade that exists separate from the employer. Compared to employees, they are subject to less control by the employer over how, when, and where they do their work. They are also not covered by employment statutes that address matters like workplace discrimination, minimum wage, or overtime pay.
Principal-Agent Relationship
An arrangement between two parties in which one party (the principal) grants legal authority to the other party (the agent) to act on its behalf. The principal can grant broad authority to the agent, or it can limit the agent’s authority to certain acts, issues, or matters. The agent’s authority may be subject to change or revocation by the principal.
When acting on behalf of the principal, the agent has a fiduciary duty to put the principal’s interests first. Any conflict of interest can cause the agent to be legally liable to the principal.
Proprietary Information
Confidential information possessed by an employer, to which an independent contractor or employee may have access in the course of their employment. Examples may include inventions, designs, formulas, computer code, and other data developed by or for the business. Proprietary information that has value to the employer by virtue of not being widely known to the general public is known as “trade secrets.” Independent contractors may be expected to safeguard the secrecy of proprietary information under a non-disclosure agreement (NDA). They may face legal liability, either under law or contract, for misusing or appropriating such information.
Severability
A clause often included in contracts stating that each provision of the contract is independent of the others. If one provision turns out to be unenforceable or unlawful, that could mean that the entire contract is invalid. A severability clause states that the illegal or unenforceable provision can be removed — or severed — and the rest of the contract will remain valid and in force. The parties may then modify or rewrite the invalid provision.
Waiver of Breach
A clause commonly included in independent contractor agreements that addresses the enforceability of the contract. A typical waiver of breach clause states that, if either party waives their right to enforce the contract or recover damages after a breach by the other party, that will not prevent future actions to enforce the contract or claim damages.
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Tips for Finding and Working With Freelancers
It is easier than ever to find freelance workers for nearly any type of project. There are numerous online resources for finding contract workers for technical gigs such as app building, website creation, and content writing. You can also find online connections to people who do onsite jobs such as lawn care, home repair, or dog walking. An advantage to using an online or staffing service is that they often take care of most of the paperwork for you. However, you still need to choose the right freelancer for your needs and maintain a positive relationship. Here are some tips for doing just that.
Evaluating Freelancers
Online freelancer platforms offer a number of ways to evaluate freelancers based on skills and performance. Look for the following information:
- Client reviews
- Project completions (the number of projects the freelancer has completed)
- Portfolios or examples of work
- Response time
- Recent employment
- Education or certifications
- Skills test scores
If you need someone to create assets for you, such as illustrations, infographics, photos, design templates, a website, articles, blog posts, social media posts, videos, etc., be sure to ask for examples of their work before hiring them. Most freelance creatives will have a portfolio to show prospective clients.
Also consider scheduling an in-person, phone, or video interview in addition to checking available information about the freelancer. Whether you’re looking for a remote freelancer or someone to do an in-person job, such as a gardener, pet sitter, or maintenance worker, an in-person interview or, at the very least, a video call, often helps to finalize the decision and is worth the extra time and effort.
Working with Freelancers
Once you have engaged a freelancer, make sure you are all on the same page regarding what you expect to be done or delivered, any milestones and deadlines, and how and when to communicate should anything about the project change. An Independent Contractor Agreement can help you get the details in a written document that is signed by both parties. This agreement can also include a confidentiality clause that requires the freelancer to keep any sensitive business information confidential, protecting you and your business’ trade secrets.
Leveraging the Freelance Network
If you end up having a positive experience and a good relationship with the freelancer you’ve hired, you may decide to provide a favorable review or refer them to your colleagues if they need similar work done. It is also helpful to network with good freelancers since they may have connections to other talent you may need to help you with future projects. And positive reviews about their project experience with you can help foster beneficial future business relationships.
Working with freelancers can be a great experience if you choose freelancers carefully, be clear about what you need, get the arrangement in writing and signed by both parties, and communicate regularly throughout the project.
Independent Contractor Agreement FAQs
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Why does a business owner need an Independent Contractor Agreement?
A business owner needs an Independent Contractor Agreement for several reasons.
Setting Expectations: An Independent Contractor Agreement explicitly sets out the expectations and parameters of the work to be done, the compensation, and the nature of the relationship itself. It is a clear-cut explanation of the expected workflow, how communication will be handled, and how the relationship will work.
Work Product Ownership: An Independent Contractor Agreement protects your business interests by:
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Establishing ownership of any work product generated as a result of the arrangement.
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Requiring contractors to actively protect trade secrets.
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Providing for confidentiality and non-disclosure of key business information.
Affirming the Independent Contractor-Client Relationship: Employers are required to do certain things for employees that they are not required to do for independent contractors, so it's important to affirm the relationship in writing. For example, independent contractors are responsible for paying all of their own income taxes, while employers are required to deduct part of the employees' taxes from their paychecks. Employers usually provide some benefits to employees, such as health insurance and paid time off. These benefits are not offered to independent contractors.
Having a contract alone may not necessarily protect you from a contractor later claiming they were an employee, but it may be a good thing to do nonetheless because it indicates the intention to have an independent contractor-client arrangement at the outset of the relationship. You might seek further protection by having an attorney review your Independent Contractor Agreement or seeking answers to questions you might have.
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What should be included in an Independent Contractor Agreement?
An Independent Contractor Agreement should contain all of these basic terms:
- Description of the services to be provided.
- How payment will be handled, whether hourly or on a per-project basis.
- Term of the agreement, typically with a definitive end date.
- Explanation of what the hiring party will provide or not provide, such as equipment, for the independent contractor to use.
- Ownership of work product if that is relevant to the work being performed.
- Confidentiality clause.
- Applicable governing law of the agreement.
These terms, as well as several others, are included in this free Independent Contractor Agreement.
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What are options for signing an Independent Contractor Agreement remotely?
There are various options available for signing an Independent Contractor Agreement remotely, but the most efficient way is to use a third-party application, such as RocketSign®, to sign the document electronically. Signing documents electronically has become a necessity due to the business challenges that have arisen as a result of the COVID-19 pandemic. Getting ink signatures on a contract can be a hassle. RocketSign eliminates the back-and-forth by providing an end-to-end solution for your document signing needs.
Having an Independent Contractor Agreement with each of your freelancers will help establish the work to be done, protect your interests in the assets that are created by the independent contractor for your business, and add clarity to the independent contractor-client relationship that is the intent of both you and your new freelancer.
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